This spring selling season promises to be the most competitive in years, with a flood of new buyers entering the market at a time when inventory is near 20-year lows. April's data suggest the home shortage could mean weaker sales activity than otherwise would be the case, based on the strength of the economy.

"Demand is easily outstripping supply in most of the country and it's stymieing many prospective buyers from finding a home to purchase," said Lawrence Yun, NAR's chief economist.

The supply of homes on the market has fallen year-over-year for 23 consecutive months, according to NAR. There was a 4.2-month supply of homes on the market at the end of the month, down from 4.6 months a year ago.

Properties typically stayed on the market for 29 days in April, down from 34 days in March.

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The decline in inventory comes at a time of strengthening demand. The share of first-time buyers climbed to 34%, up from 32% in March, as young people began to re-enter the market in force.

To be sure, the trend so far this year has been of a strengthening market. Home sales in the first quarter hit their fastest pace in a decade.

Sales are now about 95% of their prerecession average, according to Ralph McLaughlin, chief economist at home-tracker Trulia, though that figure doesn't account for population growth.

Sales have been able to recover as much as they have despite falling inventory levels in part because buyers are pouncing on newly listed homes, which suggests it could be difficult for sales to continue to grow without an infusion of fresh inventory.

Buyers purchased more than 25% of homes on the market in April, a 13-year high, according to Mr. McLaughlin's analysis.

The median sales price in April was $244,800, up 6% from a year earlier. Sales in April were up 1.6% compared with a year earlier,.

Inventory has remained low in part because of a sluggish rate of new-home construction. Housing starts declined in April for the third time in four months.

New home sales also declined in April, suggesting broad-based weakness in the market if the trend continues. Purchases of new, single-family homes, which account for a narrow slice of all U.S. home sales, decreased to a seasonally adjusted annual rate of 569,000 in April, down 11.4% from March, the Commerce Department said Tuesday.

"In reality, these conditions -- tight inventory, high demand and rising prices -- look to be with us for a while to come, and buyers should get used to this new normal," said Svenja Gudell, chief economist at Zillow.

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Write to Laura Kusisto at laura.kusisto@wsj.com and Sarah Chaney at sarah.chaney@wsj.com